San Diego’s Dirty Little Secret About Short Term Rentals

In 2015 the City Attorney’s office, under former City Attorney Jan Goldsmith prosecuted Rachel Smith, who was operating a short term vacation rental (STVR) – renting rooms to tourists – out of her home in the neighborhood of Burlingame in North Park. She was advertising the rooms on Airbnb.

In the Matter of Rachel Smith v. City of San Diego, Administrative Hearing Officer Catriona Miller ruled in favor of the City. She concluded that Rachel Smith had “violated the law by operating a bed and breakfast establishment without a permit.”

In her decision, AHO Miller stated;

“The elements of the bed and breakfast statute were met: The Respondent, while present, used her primary residence to provide lodging for less than 30 days to paying guests. While Respondent did not serve breakfast regularly in this establishment, it is the type of establishment where breakfast is typically served.

Moreover, the visitor accommodations when rented through AirBnB were primarily, if not exclusively, for visitors and tourists not from San Diego and here for vacation or special events like Comic-con. The fact that the claimant did not rent the room on a full time basis and also had many nonpaying friends or relatives does not exempt her from the statute.

In fact, in the same chapter of the code, it specifically states accessory uses must also comply with the use table. This would take precedence over the description of the used category in chapter 13, which includes lodging “primarily” for visitors and tourists. To hold that a part time Bed and Breakfast establishment would not be subject to the requirements would not make sense under the legislative scheme, as they use would still be changed and intensifies the use, creating an impact upon the residential community.”

Rachel Smith was ordered to cease the operation and pay $22,400 in penalties – reduced to $15,000 if she had no similar offenses – and to pay costs to the City of $2968.31.

So, what’s the bottom line?

The City is no longer enforcing the law. Mayor Faulconer has told DSD not to prosecute STVR operators, despite this ruling – and despite City Attorney Elliott’s memorandum, which unequivocally states, STVR are prohibited under the SDMC.

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I don’t understand why Mayor Faulconer is refusing to enforce the zoning laws re STVRs. We live next to one of these mini hotels and for several years it has impacted our quality of life . Every few days about 20 strangers move in and party. Even if it is a “nice” intergeneralional family the acoustics are such that the pool noise is audible in every room of our house. Neighbors two streets up the hill are also impacted. Instead of having next door neighbors with whom we have a relationship, there is a constant stream of strangers. It’s essential that the mayor do his duty and enforce the law of the city.

Mayor Faulconer’s repeated excuse for not enforcing the law is, he’s waiting for the City Council to act.
But why?
The City Attorney has said short term vacation rentals are prohibited in San Diego. This misfeasance is nothing more than the Mayor – with an inexplicable assist from the Council and City Attorney – playing politics and trying to shift the blame for the destructive effects of short term rentals onto the City Council.
It won’t work – and it’s not working.
The Council should rebuke the Mayor and – like Santa Barbara, Santa Monica, Coronado, Huntington Beach, Hermosa Beach, Laguna Beach, Long Beach Manhattan Beach and a raft of other coastal cities – reiterate the existing code. Council members should demand Mayor Faulconer instruct the Development Services Department/Code Enforcement Division and the City Attorney to work to remove short term rentals from our residential zones.
In addition to contributing to the breakdown of the social fabric of our neighborhoods (among other effects, public schools in the areas with the highest numbers of short term rentals have seen an alarming decline in enrollment), according to USD Professor of Economics, Alan Gin – the “go to” economist for San Diego government – if the 10,000 entire home short term rentals were returned to residential housing stock, San Diego’s shortage of 68,000 residential dwelling units would be reduced by a staggering 15%.
Now tell me the Mayor’s working for San Diego residents, when he refuses to enforce the law in the face of the overwhelming evidence that short term rentals benefit the few at the detriment of the many. The cost to our community is staggering. The knock-on effects are staggering in their breadth. Ask any economist worth his salt. Ask Alan Gin.
Mr. Mayor and Councilmembers, with all due respect, the TOT the City collects from short term rentals is a pittance in comparison to the economic damage. San Diego is in a decades long housing crisis. Wealthy individuals may benefit from the increase in residential property values, but they’ll lose money on their other investments – including their companies.
UCSD struggles to find housing affordable for professors. Local tech, bio-tech, research and manufacturing are having the same housing problems. Think about it. What does this mean for San Diego’s biggest economic drivers if these industries can’t find housing affordable to workers? This is happening – now.
And what about low wage workers? Service workers? Where will they find rentals – homes? Outside of the City? What will this do to San Diego’s climate – and freeways? What will become of the climate action goals the Mayor and City Council are so proud of?
In addition to everything else, San Diego doesn’t have the physical or administrative infrastructure to handle 14,000 short term vacation rentals – and that’s the number today. And short term rentals are growing at the staggering rate of over 30% a year – over 50% in some communities.
Airbnb, through it’s lobbyists, including Craig Benedetto, Ben Haddad, Tony Young and others – all of whom have long standing close ties to Mayor Faulconer are doing San Diegans and their families – and future generations of San Diegans – an incredible disservice.
Honestly? They should all be ashamed – and held to account.
Mayor Faulconer and Councilmembers of both political parties need to know, that unless short term rentals continue to be prohibited in residential zones and City officials actively begin enforcing the law, that the effect on San Diego will be incalculable and apparent in it’s destructive effects.
And they need to know that San Diegans – in particular those in the communities most heavily impacted – will not forget what they did – or did not do.
So if any of our elected officials – including Mayor Faulconer – aspire to higher political office, they should stop kowtowing to Airbnb, it’s lobbyists and the 5000 short term rental owners/operators (half of whom are not San Diego residents).
These aren’t tea leaves we’re reading – these are facts. And I respectfully suggest to our elected officials – they start looking at them.

Every “Vacation Rental”; takes away a rental for average San Diego people: jacking up rent for all renters; while detracting from our communities!
Do you hear me: Mayor & City Council? Tourists don’t vote here!

The problem is, Airbnb continues to hit a bee hive of 60,000 cities and expects not to get stung…

How can a billion dollar company like Airbnb expect to use their own personal Credit Card Merchant Account to book room rental accommodations, whereby they collect 100% of all room revenue, and yet have no personal obligations to remit any Transient Occupancy Taxes (TOT)?

Can you think of any Merchant/Business owner in the United States in any business that collects 100% of the revenue and has no tax obligation whatsoever? I think not.

Airbnb even avoids/dodges business taxes around the world by using an Ireland Credit Card processing company and calling Ireland their world headquarters.

It looks like city council members, city attorneys, mayors, and journalists are starting to realize that Airbnb is the Wallet/Bank on every transaction, and therefore personally liable for all (TOT) to every City on every transaction as the “Principle Retailer” and”Merchant” for each room rental booking they Accept. (Please see: http://thehill.com/policy/technology/286333-airbnb-takes-its-fight-to-court)

Every city across the globe is owed millions in back-taxes form Airbnb, HomeAway, VRBO, FlipKey and many others.

Furthermore, every Host on all of these platforms has Novated all of their tax obligations to each platform (I.e. Airbnb) in exchange for a commission. It’s called consideration. And Airbnb accepts this obligation and collects 100% of all moneys by using their personal Credit Card Merchant Account and InstaBook.

The Host doesn’t even Accept the reservation, Airbnb does through their InstaBook system!

City Attorneys are starting to educate themselves about Novation Contracts and Principle Retailers, which will stop the encouragement of anyone who thinks about slapping a merchant account onto a database of scofflaws that steals tax revenue (TOT) from city tax authorities.

In San Francisco it’s your classic Tortoise v. Hare story with Sup. David Campos playing the role of tortoise… Everyone knows “software” can be used to outrun the “law”… in the short run.

At least when Jesse James robbed a bank, he rode out of town and never returned. Airbnb sits in the lobby and continues to pilfer transient tax revenue (TOT) from 60,000 banks, while waiting for the authorities arrive… That’s not a business plan, that’s criminal behavior by a couple of art majors…

I happen to live next-door to two STVR (Airbnb) residences and it’s been a nightmare. My only recourse was to contact Code Compliance and that also was a nightmare. They have no clue how to enforce the codes. I get a story from them one day and then the next day it’s a completely different story. It’s unbelievable to be honest.

I have contacted the Mayor’s office and they first had me speak to John Ly, Director of Outreach, who never returned my calls. I then escalated my attempts and got a hold of Faulconer’s Chief of Staff, Stephen Puetz, about this issue……He promised me some action concerning this problem was around the corner. Then a year went by and nothing. After waiting a year I tried to get a hold of him again but he would never return my phone calls. Now Puetz is gone and they have a new Chief of Staff who I emailed and called two weeks ago, and they have not attempted to get back to me either.

Does anyone else see a pattern here? Mayor Faulconer doesn’t care. His style of government is to sit on his hands, do nothing, and have them people around him and other city departments do nothing either. Just look at how he handle the recent Hepatitis A outbreak….he knew about it awhile ago and did nothing too.

Maybe a recall is in order. Bottom line the fabric of our society, our neighborhoods are being destroyed from Airbnb and STVR and something needs to be done. If our leadership won’t do it…..time for a change. How many signatures do we need for a recall? I’m ready to sign!

I think a Recall is a great idea. How do we get that going? It appears that the only thing Mayor Faulconner does well is pass the buck! Time for new leadership.
Its a travesty that the the vacation rental owners being the clear minority, are running the show to the detrement of all the rest of the residents of what used to be Americas finest city. I want to get involved in the fight. How do I do this and who do I contact? MARY DOUGLAS

“At recent community town halls in Clairemont, La Jolla and Pacific Beach, frustrated and angry voters have let elected leaders know they want San Diego’s zoning laws enforced and their neighborhoods protected. Exemplifying the tone deaf response from City Hall, District 3 Councilmember Chris Ward has released a proposal that would legalize owner-absent short-term vacation rentals in all San Diego neighborhoods and invite investors to accelerate their assault on our residential communities.

Please tell Chris Ward he is wrong. Begin your protest by attending the University Heights Community Association meeting on Oct. 5, where Ward is scheduled to give a presentation and answer questions.

The meeting is Thursday, October 5 at 7 p.m. at Alice Birney Elementary School, 4345 Campus Ave. off Washington Street in Hillcrest. The meeting is open to everyone.

Not only would Ward’s proposal make finding a home to buy or a place to rent long-term much more difficult for families and workers, it also would continue to trample the property rights of current homeowners. They relied on zoning laws to buy in residential zones, but now find that the promised reasonable expectation of a peaceful environment at their homes is being sold for profit by Airbnb and other hosting platforms”

David Klaft’s response is very well done. Spot on analysis, David. The only thing I would add is something I pointed out at the March 24 Smart Growth and Land Use hearing. That is, the Airbnb business model – in addition to everything mentioned by David – is built upon the premise of trampling the property rights of neighbors in residential zones. In 1926, the United States Supreme Court considered a case in which an Ohio company wanted to build hotels on land zoned as residential. The company argued the value of its land was diminished because local zoning laws prevented it from building hotels. The Supreme Court rejected the company’s arguments. It said, in essence, that cities have the right to establish zoning laws and individual citizens, relying on those zoning laws, have a right to a reasonable expectation of a peaceful home environment, free from commercial enterprises. Precisely the same principle applies to Airbnb today. It is clear, particularly with owner-absent, whole-home STVRs, that Airbnb is operating a platform that allows hotels to operate in residential zones. Just as clearly, that violates neighbors’ property rights.

The road block on the STVR issue rests with former D2 councilmember and now mayor, Kevin Faulconer. For ten years San Diego residents have pleaded for his help on the STVR issue. First inaction, now obstruction. For YEARS the mayor has instructed Code Enforcement to not enforce the existing municipal code. Efforts by the City Council have been met with NO SUPPORT. First efforts by D2 Councilmember Lorie Zapf and former Councilmember Sherrie Lightner, and now Councilmember Barbara Bry have failed to receive his support. He has dissed his City Attorney. So who is he listening to? Certainly not the residents of San Diego. By FAR the majority of San Diego’s residents want the current code enforced, with a provision to allow Home Sharing. AIRBnB and other rental platforms WANT STVRs wherever, whenever, no matter, framing the issue has a noise problem. They have lobbied hard, the money has flowed, and our city housing supply for residents and our neighborhoods have suffered.
Again, we suffer from failed leadership. Enforce the code Mayor Faulconer. Host Homes and owner-occupied rentals are not the problem. Support those. Protect our housing supply and our neighbors. ACT NOW.

It is incorrect to say that owner-occupied STVRs are not a problem. I have the misfortune of living next to one. Our once quiet cul-de-sac has turned into Hotel Circle. Noise is just the tip of the iceberg of problems. Lack of parking, trash, cigarette butts on our sidewalk and a revolving door of 500+ strangers who pass through annually are a few of the others. Who’s protecting the RS-1 zoning rights for which we paid so dearly? Certainly none of our elected officials.

Anyone catch the VoSD podcast about a month ago where they had that PR guy from Air BnB on? The guy had the gall to say that STVRs in San Diego had only increased from 8k to 9k since they AirBnB came into SD. Absolute horse****

None of the decision makers seem to care about residents; those of us that struggle to pay the bills, and contribute to our community: its all about the $$$!
Oh I almost forgot: there is a Housing Crisis here: sound the alarm, while observing the “pigs at the trough”.
Movie over piggie: I live here!

Repeat after me: Neighborhoods are for residents 3x!
If some one bought a home dependent on renting it to t space for the tourists: that is not our problem!
Get your tent & head on over to the politicians yard; tell them you are here to rent space & promise to be good.
Would you be welcomed?

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